Ramu Agri-Industries set to take PNG into the future

Leading Papua New Guinea company Ramu Agri-Industries is poised for a very exciting future as it changes from a one-product company into the premier PNG agri-industrial business.

As part of the strategic positioning of the business, the company last year changed its name from Ramu Sugar to Ramu Agri-Industries Ltd, to reflect the broad spectrum of activities the company was now undertaking.

Despite the name change, the company, of course, continues to market its products under the brand names of Ramu Sugar, Ramu Ethanol and Ramu Beef.

The company was formed in 1978 and first produced sugar in 1982.

Its turnover last year was K107 million, out of the total PNG GDP of about K17 billion at current prices, which shows the important role Ramu plays in the GDP of this country.

The total work force is approximately 750 permanent employees plus 1,500 part-time employees.

Both of these numbers will increase in the near future as the oil palm expansion proceeds.
The major shareholders of the company are IPBC (26%); NasFund 19.75%; W R Carpenters 17%; Nambawan Finance (7%) and MVIL (8%).

Ramu exports sugar to the USA, beef to the Solomons and ethanol to Australia.

Its major problems revolve around the pests and diseases which are endemic to the Ramu Valley and to the fact that cane originated in Papua New Guinea.

Board Chairman Peter Colton makes no qualms that the company is “forward looking and future driven”.

“The domestic sugar market is clearly expanding,” he said.

“Revenues from oil palm look very promising.

“The prospects for our beef operation are excellent.

“We have recently leased an additional 7,500 hectares of land.

“The agreement with outgrowers to farm the disputed land will further increase our land bank.

“This will enable us to plan to grow all key businesses in stages over the next several years.

“The prospects for cashew and bamboo offer further prospects for diversification.

This means that during the current financial year, the company will be producing and selling crude palm oil and cattle and beef products, as well as sugar, molasses and ethanol.

The prospects for oil palm look very promising, so much so that the Board has decided to approve an increase in the planted area from 5,500 hectares to 7,500 hectares.

“This will enable us to increase the capacity throughput of our mill from 30 tonnes per hour to 45 tonnes per hour to fit in with the full foot print of the foundations and buildings,” Mr Colton said.

“We have in effect accelerated our expansion plans to take advantage of the fact that our yields are better than projected and the buoyant state of the palm oil market.

“Phase II of the oil palm division will be a doubling of the existing 7,500 hectares in the Dumpu to Walium area and a new mill.

“The timing of this is yet to be determined.

“While we do have some of our own land available at Dumpu, this phase will be very dependent on our ability to obtain secure title to sufficient land and the involvement of village farmers.
“The prospects for oil palm are very promising.

“The price for crude palm oil in Europe is at record highs.

“Most industry analysts are forecasting a price of between 600 and 700 US dollars per tonne for crude palm oil.

“Our oil palm consultant advises that the palms are growing well and he expects yields per hectare and overall extraction rate to be on or slightly above his targets.

“Village farmers have around 100 hectares under development at the moment and we hope to increase this to 750 hectares.

“Progress has been slower than we hoped due to land disputes between village people.

“We have signed an agreement with National Development Bank and the Madang Provincial Government to help achieve the target of 750 hectares”.

Ramu has been successful in leasing an additional 7500 hectares of land at Leron for its cattle.
“This increase in our land bank will assist us in our objective to expand the beef herd to around 25,000 cattle,” Mr Colton said.

“The annual turn off will then increase from the current 4,500 head to 8,000 head.

“A market study commissioned last year showed that we have 9% of the domestic beef market.
“The company plans to increase its market share to 20 per cent through import substitution.

“Hand in hand with our own expansion will be a drive by the company to increase the number of smallholder cattle farmers.

“I am pleased to report that we are already enjoying enhanced weight gains and lower slaughter age and that we have been able to improve the feed quality for our cattle by growing and harvesting sorghum for the production of silage."

Mr Colton said the Ramu Board was reviewing the feasibility of establishing the company’s own genetic improvement programme and introducing new bloodlines to improve the weight for age equation and improve the eating quality of the meat.

“This has favourable implications for the whole of the PNG cattle industry,” he said.

“During this process the centre of the beef operation will shift from Dumpu/Gusap to Leron/Markham.

“The board continues to position Ramu as a future driven company.

“The implications of the larger herd size, the weight gains and our target of a 20% market share, are that at some time in the future, the company will need to consider the replacement our existing abattoir.

“The strategy we have adopted should substantially improve the returns from the beef division.”

After the disappointment of 2006 in which the company’s main revenue earner, sugar, suffered from a combination of adverse weather conditions and pests and diseases, it is back on the rebound.

Last August, Mr Colton was able to sign a Memorandum of Understanding with the parties who were disputing ownership, to give Ramu Sugar full access to this land.

“This is significant because we can now resume normal production of cane close to the sugar factory rather than 25km away at Dumpu,” he said.

“As soon as it became obvious that we had cane supply difficulties, we took immediate action to restructure and strengthen the agricultural function by outsourcing cane production to our former corporate managers Booker Tate.”

The Board last year received a report stating that “the cane recovery programme is well on track and we may expect to achieve our target of 500,000 tonnes of cane in 2009”.

Also last year, Ramu’s diversification programme kicked off in earnest and its reliance on sugar started to reduce.